HUL’s sale of 2-decade old brands unlikely to turn D-Street bitter - Economic Times

Hindustan Unilever Ltd’s (HUL’s) decision to divest two of its decades-old brands ‘Annapurna’ and ‘Captain Cook’ is unlikely to sour Dalal Street’s taste for the stock, as this is in line with the company’s strategy to exit non-core categories.

The FMCG on Friday signed a deal with Singapore-based Reactivate Brands International to divest the two brands in the “atta and salt” categories of the foods business for Rs 60.4 crore.

“HUL’s decision to divest is in line with the stated intent of exiting non-core categories while continuing to drive its growth agenda in the packaged foods business of dressings, scratch cooking and soups,” the company said in a release.

Despite being more than two decades old, the turnover of the two brands was Rs 127 crore in FY22 and they contributed less than 1% to the overall turnover of HUL.

The transaction, which is expected to close within 90 days, includes sale of the trademarks, copyrights and other intellectual properties and any exclusive assets and contracts associated with the brands.

The two brands are being divested to Uma Global Foods Pte Ltd and Uma Consumer Products Pvt Ltd, which are affiliates of the Singaporean company.

Two decades ago, HUL’s ‘Captain Cook’ salt brand was directly competing with Tata Salt. While Tata Salt promoted itself as the ‘iodised salt’, Captain Cook raced ahead by terming it as the ‘free flowing, iodised salt’. However, Tata Salt had by then strengthened its position in the organised salt market, and today it is the largest segment for Tata Consumer Products.

In the December quarter, Tata Consumer’s salt segment registered double-digit growth in revenue despite price cuts, and the company further gained market share.

Like salt, the competition turned aggressive even in the wheat flour segment with the entry of more players.

Diversified conglomerate ITC entered the branded ‘atta’ market with the launch of ‘Aashirvaad Atta’ in May 2002, and within a very short span, it became the number 1 branded packaged atta across the country, according to reports.
Sometime in 2018, ‘Aashirvaad Atta’ became a Rs 4,000 crore brand with a market share of 28%, and the number has improved further.

Given the growing competition in the categories and HUL’s business strategy to focus on packaged foods, sale of the heritage brands made sense. “Given our strategic priorities and portfolio choices, we believe it is in the business' best interest to sell these brands to Reactivate Brands International, which is well-positioned to unlock their full potential,” Sanjiv Mehta, MD and CEO of HUL said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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HUL’s sale of 2-decade old brands unlikely to turn D-Street bitter - Economic Times
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